Italy gives up on Google tax

Italy is set to abandon a plan which would have forced Google and Amazon to pay tax in Italy. The law would not tax the multinationals directly, but require them to use Italian companies to sell their advertisements rather than doing so through third parties based in low-tax countries such as Luxembourg, Ireland or outside the European Union.

Prime Minister Enrico Letta's government last month proposed the law, dubbed the "Googletax", that would oblige companies that advertise and sell online in Italy to do so only through agencies with a tax presence in the country. The lower house budget committee late on Tuesday, however, excluded goods bought online from the legislation - also known as the "Web tax" - making the law applicable toadvertising only. The measure would become law with the passage of the 2014 budget, due by the end of the year.

Opponents of the measure say it would probably violate EU rules, proponents have said it will raise at least 1 billion euros ($1.37 billion) a year for a country that is struggling to lower its debt, the second-highest in the EU after Greece. The Senate is expected to cast the final vote on the 2014 budget before Christmas. The lower house is expected to vote by the end of the week on whether to include the "Google tax" in the budget.